It happens quite frequently that a client calls me to say that the Closing Date for his/her new construction residential property is fast approaching but when he/she drove by the project site, it seems highly unlikely that the builder will be able to complete the construction on time. And just as frequently, these purchasers receive a notice from the builder extending the closing date.
Purchasers should keep in mind the following points when faced with such extensions of the closing date:
Statement of Critical Dates
Attached to and forming a part of every agreement of purchase and sale for pre-construction residential property is a Statement of Critical Dates. This sets out the First Tentative Closing Date, the Second Tentative Closing Date and the Firm Closing Date. (Note: with condominium developments, the Statement of Critical Dates will set out the First Tentative Occupancy Date and the Outside Occupancy Date).
The Statement of Critical Dates also sets out the required Notice period for any changes to these dates.
The Notice from the builder to any extension of the specified dates must be given within the time period set out in the Statement of Critical Dates to be valid. For instance, if the First Tentative Closing Date is March 30, 2012, then the builder must give written notice of any extension of this date no later than December 31, 2011 (i.e. 90 days prior to the First Tentative Closing Date). If the notice is not given on or before December 31, 2011, then the First Tentative Closing Date becomes the Firm Closing Date.
Delivery of Notices
The builder is required to deliver all notices to the purchaser at the address provided in the Agreement of Purchase and Sale. The purchaser should, therefore, advise the builder of any change of address.
Where the builder fails to give the required notice and cannot give occupancy/possession of the property on the closing date, the purchaser can make a claim for delayed closing compensation.
Thus, where the First Tentative Closing Date is March 30, 2012 and the builder does not give notice of an extension on or before December 31, 2011 resulting in March 30, 2012 becoming the Firm Closing Date, the purchaser may make a claim for delayed closing compensation for each day after March 30, 2012 until the date when occupancy/possession is given.
Amending the Closing Date
Some times, builders will ask the purchasers to sign an amendment to the Agreement of Purchase and Sale changing the Closing Date. Purchasers should be vary of these amendments as by signing the amendment they may be waiving their right to the delayed closing compensation. If the amendment is signed, the clock starts running all over again as if the amended closing date is the original proposed closing date.
The divisional court in case of Keith Markey v. 1353464 Ontario Inc. held that where the builder wants to extend an occupancy or closing date by amending the Agreement of Purchase and Sale, it must disclose the consequences of such amendment to the purchaser and obtain a written waiver from the purchaser to any delayed closing compensation.
These are case-by-case so you should always get legal advice.
Please visit www.real-corp-law for more information.